Health-Stock Refuge No Refuge at All

by Vanessa Fuhrmans

In past economic downturns, investors looking for cover from falling share prices could always run to health-care stocks. This year, though, that classic safe haven appears worse than the storm.

Recession or not, people get sick and use prescription drugs, medical devices and plenty of other medical services. That’s the driving logic behind the health-care industry’s usual resistance to the economy’s twists and turns.

But so far in 2008, health-care stocks have taken an even bigger beating than most. The Dow Jones Wilshire U.S. Healthcare Index is down 11% since year end. By contrast, the Dow Jones Industrial Average is down 5.9%, after losing 3.9% last week, and the Nasdaq Composite Index is down 7.8%, after tumbling 3.3% last week.

Some of the biggest managed-care and pharmaceutical companies have led the plunge. Humana, one of last year’s top performing health insurers, is down 35% this year, while WellPoint and Health Net have dropped 39% and 36%, respectively. Among drug makers, Merck has fallen 33%, while generics maker Barr Pharmaceuticals is down 19%. […]

Fed cuts target lending rate by 50 basis points

NEW YORK (Reuters) – The Federal Open Market Committee on Tuesday lowered the benchmark federal funds target rate by a half percentage point to 4.75 percent from 5.25 percent, where it had stood since June 2006.

The reduction was more aggressive than many investors had expected. A 25-basis-point cut was fully priced in by rate futures markets, but bets for a 50-basis-point reduction were pared sharply in recent days.

In a related move, the Fed also lowered the discount rate it charges for direct loans to banks by a half-point to 5.25 percent.

COMMENTS:

BILL O’NEILL, PARTNER, LOGIC ADVISORS, UPPER SADDLE RIVER, NEW JERSEY:

“Obviously this was a very substantial, aggressive move. I think it’s bullish for gold. I think it has potential inflationary implications.”

SCOTT FULLMAN, DIRECTOR OF INVESTMENT STRATEGY, I.A. ENGLANDER & CO:

Lower inflationary pressures combined with the liquidity problem continues to threaten the recovery in the housing market. It was apparent in the commentary that the Fed is concerned about the slowdown in the economy, reflecting that slowdown in the housing market would spill into the broader economy. There was commentary that the Fed would monitor the situations, which might include an increase if inflationary pressures return. […]

Postponing Doom II: Economic Boogaloo

http://blogs.wsj.com/marketbeat/2007/08/17/postponing-doom-ii-economic-boogaloo/
Posted by David Gaffen

It was telling that when the Federal Reserve eased the discount rate this morning and made noises about readying for a potential interest-rate cut, stock futures weren’t the only asset class that rallied, but global stocks, oil, commodities, gold and swap indexes and other derivatives were all higher.

It underscores, again, what cheap credit has meant to the economic growth in recent years and suggests the Fed likely has more work to do to head off the credit conflagration. But economists believe the actions, and even subsequent ones, won’t relieve the economic pressure entirely.

“The carnage is far from over,” write analysts at Comstock Partners, who note that some are minimizing the current problems as market-oriented only. “Some studies indicate that as much as one-half to two-thirds of the increase in output and employment since the last recession bottom were a result of housing, housing-related activities and MEW [mortgage equity withdrawals].” […]